In light of the myriad changes both commercial and consumer culture have undergone in the past decade, successful fashion businesses must blaze their own paths. Two very different (but similarly successful) examples of such companies are Canada Goose (NYSE: GOOS)and Stance Hosiery.
Canada Goose is increasingly being held up as an example of the "ideal operating strategy for the new age of retail brands." Recently, it has shifted more sales to "direct to consumer channels" and away from wholesale. This will improve its sales and profit margins, justifying the high prices of its products. Canada Goose has also maintained its authenticity and brand heritage, while delivering a high quality product. This combination explains why customers repeatedly are not deterred by its "premium price points."
While Canada Goose's stock has been struggling recently, commentators claim this may not always be the case.The company has seen shares "gain 42 percent since its trading debut in March, which boosted its market value to $2.58 billion." Commentators believe that the company's unique strategy will be imitated by other contemporary retail brands. Previously accessible only through high end department stores (e.g. Bloomingdales, Barney's and Saks (NYSE: SKS)) and independent stores, Canada Goose has moved away as these department stores struggle.
By first opening a website and new stores of its own, the company has focused on direct-to-consumer sales. It is rapidly growing its e-commerce, bolstering these gains with flagship stores. The company's focus on e-commerce saves it the "untold sums" other companies have spent "building fancy stores and expensive marketing campaigns." Nonetheless, the company's strategic locations and brand recognition tactics ensure that it does not necessarily forego the visibility that such campaigns and stores would offer.
Canada Goose has also branched out into country specific offerings, while opening brick and mortar stores around the world in cornerstone global cities. Its brick and mortar stores are small but strategically placed, maximizing brand awareness while remaining sustainable for overall sales productivity. (The company still only produces winter wear, with a recent exception of branching into knitwear with merino wool.) Even though the rise of online shopping (i.e. Amazon) has foretold the death of retail, "properly placed and sized stores provide tremendous brand awareness and full retail sales revenue."
Canada Goose's branding is also strategic. By evoking an authentic sense of heritage, this "performance luxury" company has created an extremely stable foundation, justifying its premium price points. The story also resonates with its consumers. The trajectory of going from small wholesale/retail business to conservative brick and mortar launches, as wholesale declines is increasingly suitable for "new age apparel brands." Canada Goose has also navigated international growth successfully, imparting an element of borderless-ness to the company. Canada Goose views its next big frontier as China, where "many upscale consumers are familiar with the brand through their travels."
The only challenge now facing the company the question of "maintaining the cachet" that compels its consumers to be willing to spend "up to $1,495 on its made in Canada parkas." Ironically, for most of the company's history, the brand was utilitarian. It sold practical winter gear for use in the Far North, and catered to a relatively isolated, niche audience. From these genuinely utilitarian beginnings, the company grew its foothold in the luxury market via its proven claims to authenticity (as per its heritage and original customer base). Other new-age retail companies employing elements of the same strategy include Bonobos, purchased earlier this year by Wal-Mart (NYSE: WMT) which sells men's clothing and accessories, and the startup Warby Parker, which sells sunglasses.
Whereas Canada Goose's brand appeal is heavily reliant on notions of tradition, classic heritage and long-held standards, Stance Hosiery has managed to successfully capitalize off the opposite values, of innovation, trendiness and cheerful, blatant opportunism in its publicity campaigns. For instance, Stance's products were "advertised" by Canadian Prime Minister Justin Trudeau during the UN General Assembly in September. Founded eight years ago, Stance Hosiery is a premium-sock startup company that has sunk a foothold in popular culture. It promises "durability, arch support and clever designs" while simultaneously engaging a "roster of celebrity investors, who promote the brand to fans." Once celebrities wear their products, Stance enjoys as much exposure as the celebrities themselves have, in light of their fanbase.
Stance is well-supported by venture capitalists. Investors like Kleiner Perkins Caufield and Byers, August Capital, and Shasta Ventures have given $110 million to the company, to the surprise of many. Equally surprising is the fact that Stance's sales will exceed $100 million in 2017. Stance itself claims to have spent over half of the money given by investors, and may need more capital to sustain its growth beyond men's socks and underwear. It plans on making inroads to women's lingerie as well, as well as expanding "subscriptions for regular shipments of its products."
The remarkable rise of Stance Hosiery contains many lessons on how to run a contemporary business today. The company has done an excellent job of optimizing its access to key, modern outlets for publicity that are available now, but did not exist a decade earlier. Stance's CEO Jeff Kearl summarizes his pivotal strategy with the observation that "a strong brand with celebrity endorsements can turn a commodity product into a luxury item." This strategy requires a heavy social media campaign to generate awareness, turning fan bases into consumer bases. Companies with similar trajectories include Skullcandy, Inc., and Beats by Dre. Kearl refers to this strategy as a "disruptive" one, and employs it in the sock industry, which had previously been largely untouched by such innovations. As socks are a "commodity market dominated by low-margin products," it is impossible for one company to gain an immense technological advantage over others. In America, sock sales total $4.8 billion per year, according to NPD as cited by Bloomberg. However, in comparison to the $56 billion Americans spent on shoes, the sock market is miniscule. Even more confusing is why venture capitalists would choose to invest in a sock company, when they typically pick companies in technology or finance.
Jeff Kearl's initial strategy was to target "surf and skate shops" with the hope that this would earn Stance street cred. The socks sold quickly, despite the high prices of $10 to $30 a pair. As they were well-made and well-received, the brand soon rode to visibility via the skaters and their followers. Stance then turned to "celebrity backers" to promote merchandise on social media and at high-profile events, such as actors, hip-hop artists, and basketball players. Eventually, it gained a temporary licensing deal with the National Basketball Association for players to wear Stance during games. Similarly, in 2016, Stance made a similar deal with Major League Baseball. But Stance still struggles in face of competitors like Nike (NYSE: NKE), given its comparatively lower profile and recent inception. It is, by and large, a "millenial brand."
Stance's design facilities are advanced, research-oriented and high-technology, as high quality designs are a core feature of the brand's ideology. Currently, like Canada Goose, it seeks to expand its manufacturers in China. Stance's investors hope it will pursue growth more aggressively, while spending more on formal advertising routes, over word of mouth and celebrity "evangelists." Nonetheless, publicity garnered through celebrity shout-outs are sometimes worth millions of dollars. It plans to establish its own retail channels, and branch out from skate shops and department stores. Just like with Canada Goose, the "decline of shopping malls" has rendered e-commerce the most promising option.